Analysis of the perceptions on target costing using a pedagogical case study

Abstract

Target costing is an established approach in Japanese companies and outside Japan its implementation is still low but gradually increasing over the years. Cultural aspects as well as normative, organizational and technical issues, among others, may influence the effectiveness of target costing in western companies. Furthermore, there are a set of principles, techniques and tools which should be well understood and applied for the success of target costing; which is mainly focused on the design and development stages of new products but also includes inter-organizational collaboration with suppliers and cost reduction efforts during the production phase. Thus, a pedagogical case study was designed to include most of these aspects. Its objective is twofold: using it to present and discuss target costing to an audience of students, managers or shop floor workers, in an interactive and dynamic manner; and also, to find and understand eventual difficulties, biased perceptions, misunderstandings and different opinions on the principles, tools and process related to target costing. It was applied to students from industrial engineering and accounting degrees. The F-test of equality of variances, the independent two-sample t test and the two-proportion z-test were used for the analysis of the results. In general terms, the responses showed no significant differences in the opinions between the two groups of participants and reflected a reduced alignment with the principles of target costing. More specifically, the students showed less alignment with the assumptions and concepts of target costing than with its tools and approaches.